Macroeconomic and Firm-Specific Elements of Group Routine: A one-step system GMM dynamic section ideal
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Abstract
The study investigated the macroeconomic and bank-specific determinants of Ethiopian banks' performance from 2011 to 2020. All the 14 commercial banks that were operational during the study period were included. We employed a one-step system GMM dynamic panel data approach owing to its lower bias and higher efficiency than other approaches such as the standard first-difference GMM estimator. The dynamic character of the model specification has been manifested through significant coefficients of lagged performance indicators. The lag of ROE, credit growth, and interest rate showed a positive and significant effect on bank performance while branch expansion, economic growth, and capital adequacy ratio exhibited a negative and significant impact on the outcome variable. However, three macroeconomic factors: deposit growth, exchange rate, and inflation rate found to be insignificant to influence bank performance. The research concludes bank-specific factors predominantly influence the performance of the Ethiopian banking industry.
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